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Canara Bank Versus The Recovery Officer, S. Ravi Shankar

2018 (2) TMI 878 - MADRAS HIGH COURT

Recovery of income tax dues - Priority of Charge - mortgage of property - Secured creditor priority over the dues payable to the Income Tax Department - attachments made by the Income Tax Department over the said property - Held that:- The issue is no longer res integra and has been considered in The Assistant Commissioner (CT) Versus The Indian Overseas Bank, M/s. Super Recording Co. Ltd. [2016 (12) TMI 373 - MADRAS HIGH COURT]. Question No.(i) was answered in favour of the financial institutio .....

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m the Income Tax Department in terms of Section 281 (1)? - Held that:- This question was considered by the Division Bench of the High Court of Gujarat in the case of Tax Recovery Officer Vs. Industrial Finance Corporation of India [2012 (8) TMI 541 - Gujarat High Court ] as held that transfer of property which was for a valuable consideration and which was without notice of the pendency of the proceedings under the Sales-tax Act and therefore, the transfer falls under the exception created by th .....

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this order. - W.P.No.25867 of 2017 - Dated:- 25-1-2018 - T. S. Sivagnanam, J. For Petitioner : Mr. P. Raghvnathan for T.S.Gopalan & Co. For Respondents : Mr. A. N. Jeya Pradhap Standing Counsel ORDER The petitioner is Canara Bank a Nationalised Bank represented by its Chief Manager and Authorised Officer, Teppakulam Branch, Trichy, and in this writ petition they seek for a direction upon the first respondent, the Recovery Officer, Income-Tax Department-Range II, Trichy, to lift the order of .....

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ew No.19, Thukkaram 3rd Street, T. Nagar, Chennai 600 017, in favour of the petitioner bank. The mortgage by deposit of title deeds was recorded by a memorandum and registered as Document No.2015 of 2010 dated 21.09.2010 in the office of the Sub-Registrar, T.Nagar. It is stated that subsequently the credit facility was enhanced to ₹ 30,50,00,000/- and further mortgage by way of deposit of title deeds was recorded by way of a memorandum dated 06.01.2014 registered as Document No.27 of 2014. .....

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respondent were informed that if they committed default in payment, the property which has been mortgaged would be brought for sale in accordance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act). The borrower as well as the second respondent guarantor defaulted to comply with the notice and therefore, the Authorized Officer of the petitioner s bank took symbolic possession of the property and also caused publ .....

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e said order, the bank was directed to hand over physical possession of the property to the said Company and further directed the Company to redeliver physical possession to the bank upon sale of the property. Subsequently it appears that the petitioner bank came to know that there were attachments made by the Income Tax Department over the said property. On verification, it was found that by order dated 20.11.2015, the first respondent attached the property and also registered the same on the f .....

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to bring the property for sale. With these facts, the petitioners prays for the aforementioned relief. 4. The revenue on the other hand would contend that the notice under Section 148 of the Income Tax Act was issued before the date of mortgage and during the pendency of the assessment proceedings, the lending bank could have taken possession only after the approval from the Income Tax Department as per proviso 2 of Section 281 (1) of the Income-Tax Act. Therefore the first respondent would ter .....

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titioner s Bank could have been done only after obtaining approval from the Income Tax Department in terms of Section 281 (1) of Income Tax Act. 6. So far as the first question is concerned, the issue is no longer res integra and has been considered by the full bench of this court in WP.Nos.6267 of 2006 and 253 of 2011 dated 10.11.2016. Before the full bench, the question which arose for consideration was whether the financial institution, which is a secured creditor or the Department of the Gov .....

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inancial Institution, which is a secured creditor, or the department of the government concerned, would have the 'Priority of Charge' over the mortgaged property in question, with regard to the tax and other dues. b) AS to the status and the rights of a third party purchaser of the mortgaged property in question. 2. We are of the view that if there was at all any doubt, the same stands resolved by view of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous P .....

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o the Central Government, State Government or local authority. Explanation:- For the purpose of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code. 3. There is, thus, no doubt that the rights of a secured creditor to realise secu .....

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foresaid would, thus, answer question (a) in favour of the financial institution, which is a secured creditor having the benefit the mortgaged property. 6. In so far as question (b) is concerned, the same is stated to relate only to auction sales, which may be carried out in pursuance to the rights exercised by the secured creditor having a mortgage of the property. This aspect is also covered by the introduction of Section 31B, as it includes secured debts due and payable to them by sale of ass .....

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hat the petitioner Bank is entitled to priority of charge over the mortgaged property in question. 9. With regard to the question No.(ii) regarding the applicability of Section 281 (1) of the Income Tax Act admittedly the counter affidavit does not state that notice was given by the Income Tax Department to the 1st respondent relating to pendency of income tax proceedings or liability of any tax payable by the 2nd respondent to the Income Tax Department. In such circumstances, would the proviso .....

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borrower in favour of the financial institution during pendency of any proceedings under the Income Tax Act is void as against any claim in respect of the tax and other sum payable by the assessee in favour of the revenue. This question was answered in the following terms:- 25. The petitioner-revenue, the Tax Recovery Officer, has not disputed the fact that no notice of pendency of any income-tax proceeding was served on the 1st respondent-financial institution on or before the equitable mortga .....

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noticed the Annual Reports of the Company to find out the liability of repayment and thereby it is to be accepted that they have knowledge of liability of payment of tax dues by the 2nd respondent in favourt of the petitioner-revenue. However, such submission cannot be accepted as a fact cannot be presumed that the 1st respondent had the knowledge of income-tax liability of the 2nd respondent-borrower Company and/or pendency of any income-tax proceeding against the 2nd respondent-borrower Compan .....

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uch proceedings, or (ii) without notice of tax or other sum payable by the assessee. Thereis nothing on record to suggest that any notice was given by the revenue to the 1st respondent relating to pendency of such income-tax proceeding or liability of any tax payable by the 2nd respondent assessee in favour of the petitioner revenue cannot take the plea that the 1st respondent had knowledge of the pendency of the proceeding and thereby it is open to the 1st respondent to derive advantage of clau .....

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